Big Blue opens RFID testing center in France; Delta says it will invest $15-$25 million in the technology

Adding to the growing buzz surrounding RFID (radio frequency identification) tagging technology, IBM Corp. on Thursday officially opened its RFID Testing and Solution Center in La Gaude, France, while in a separate move, Delta Air Lines Inc. said it is planning to invest $15 million to $25 million on the technology.

The new IBM center is the first of its kind in Europe, according to Faye Holland, worldwide RFID leader at IBM Global Services, and is part of the Armonk, New York, company's ongoing efforts to make users out of those who have shown interest in the wireless tracking technology.

"There has been a complete shift in the RFID arena since January and there is a massive interest in it in many more markets and industries then there was six months ago," Holland said.

The RFID testing center in La Gaude is intended to complement existing IBM development centers in the U.S. (in Gaithersburg, Maryland) and in Japan (in Tokyo). "All of our labs around the world have some RFID capability, but the RFID testing center in France allows for detailed physics testing of RFID," Holland said.

Additionally, customers interested in RFID can see how it works as part of an end-to-end application, and can inspect the middleware needed to integrate the technology to back-end systems, she said.

IBM is targeting the wireless technology at a number of industries, including pharmaceuticals, retail, logistics, manufacturing, electronics, government and transportation, and the center will provide prototypes for potential customers in their specific industries, Holland said.

One industry seemingly already on board with RFID is the airline industry. Delta, The Boeing Co. and Airbus SAS have all announced they are testing RFID technology and are working to develop standards for the aviation industry. Delta spokesman Reid Davis said on Thursday that while the Atlanta-based airline was not making a formal announcement about its investment plans in RFID, it did want to set out its vision regarding the tracking technology.

"There is a lot of stuff that is kind of fuzzy right now in terms of our RFID plans, but within the next 24 months we do envision having some RFID tagging up and running," Davis said, "that would definitely include bags and cargo, though all sorts of other things could piggy-back on those initial implementations."

Delta, as well as The Boeing Co, both announced earlier this month that they have been testing RFID tags to track airplane engine parts.

Davis warned that because the airline industry in general is struggling financially, the costs associated with implementing RFID do come into play. "This technology is brand new for us -- RFID isn't replacing some other system -- so implementation is a daunting task," he said. But Davis added that Delta does see incentives for investing up to $25 million on RFID.

"Right now we mishandle less than 1 percent of all bags we carry, but that costs us roughly $100 million a year to rectify. If RFID tags could cut down those costs and bring better service to our customers, then we can see pay back associated with these investments," Davis said.

According to IBM, RFID technology is already highly economical for companies looking to track inventory, streamline production and reduce theft, as the cost of tags and readers has been dramatically reduced over the last 18 months. "Cost is a really interesting debate," IBM's Holland said. "The business case for RFID is most definitely around cases and pallets, but we believe that by 2009, 50 percent of 'high value' items (such as items with warranties) will be tagged."

However, Jeff Woods. principal analyst at Gartner Inc., said that even people who sell high-value items (regardless of the definition), are struggling to make the business case for RFID.

"Everyone's got a hunch that this is such an important technology, so no one wants to be the nay-sayer," Woods said Thursday.

In his report, "Prepare for Disillusionment With RFID," published Wednesday, Woods writes that the benefits of RFID have been oversold, and that it is unlikely the technology will be able to live up to its near-term promises.

"There are great aspects to RFID and Gartner remains positive about the technology for the long term," Woods said, "but there are downsides including, of course, the cost, but also other things like security."

People are often surprised to find out that RFID isn't totally secure, Woods said. "In some cases, RFID tags have been shown to have failure rates as high at 30 percent. And where there is an incentive to subvert the technology, like in the retailing grey market, it takes some effort but it can be done. For example, the key links are short enough to just brute force break," he said.

According to Woods, through 2007, the strategic business cases for RFID will be meaningfully explored by only a limited number of early adopters. Additionally, by 2007, at least 50 percent of RFID projects under way in 2004 will fail. "In many cases bar code technology is, and will remain superior to, RFID," he said.

Where RFID does have success is in chaotic situations, such as in hospitals and in battlefields, where bar coding isn't practical, Woods said. "Another area where RFID works well is in situations were the person collecting the data doesn't really care about data collection. For example, a 16-year-old working a part-time retail job may not be very motivated about data collection."

So while a country's defense industry may have a great business case for RFID, Woods finds many other business cases, such as for ports, less interesting. He added that he thought Delta's RFID business case was marginal.

"The business cases for RFID aren't nearly as easy to achieve as has been advertised," Woods said.